When it comes to trading platforms, there is no legal limit to how many accounts you should have. Although it is a thing that should make things easier for you, this is not how it goes for everyone. Some people get multiple trading platforms and end up messing up with everything. Though there is no legal limit, you should know how many accounts you can handle.
It does not make any sense that you have 10 sports cars when you can’t even drive, right? Similarly, you should only create trading accounts on limited platforms. This will make things easier for you to handle. The best way is to take a start from one platform and as you master things, you can start using another platform. Eventually raising the accounts will be beneficial for your stable profitability.
Furthermore, the platforms vary from region to region. Therefore, you should look for the top trading platforms in your country and then choose the one that you want to start with. Be sure to read more about the best trading platforms in the UK.
After looking at the list you will be able to choose the right one for you. If you are a beginner, you can go with eToro and if you prefer using a mobile phone for trading, you can work on Plus500.
If you are planning to use multiple platforms, you need to make some rules for yourself. They will help you out in reducing your mistakes.
1. Study different platforms and account types
You should study the different platforms. Every platform has its set of rules and regulations that traders and investors should follow.
For example, certain platforms offer minimum investments of even a few hundred pounds. There are no limitations and you can invest any amount you want. Furthermore, you can withdraw your amount any time you want. These types of platforms are suitable for taxable and are known as general-purpose investment accounts.
Similarly, there are Traditional accounts. These accounts are suitable for retirement money. You will get tax advantages here. However, because it is your retirement account, you won’t be able to withdraw your money before the age of 59. In addition to this, there is a contribution limit too.
Then there is another category, which is College savings. This account type is also offering tax advantages because its main purpose is to use the money for college education.
Another type is the Custodial account. This type is for people who are managing investments for a minor.
Then there come the Business accounts. As the name shows, they are for businesses. Therefore, they deal with large-scale investments. Or you can use your account for self-employment or for starting your small-scale business.
2. Differentiate your purposes
If you are investing your money for different purposes, you should differentiate your accounts too. It is only right for you to divide your investment to gain more profit but every investment should have a purpose too.
For example, you can invest in one account to get a house after 5 years. Likewise, you can have another account on another platform for your savings. The amount you invest in both platforms will be different because the outcome is different and your purpose is different.
If you have a greater purpose, you will need more money. Thus, you will invest more money for long-term and better profits.
In addition to this, different platforms offer different investment opportunities. Some platforms allow only big investments. Therefore, you cannot invest a few hundred dollars there. Furthermore, you won’t be able to withdraw your investment any time you want. There are rules to follow.
3. Trading different assets
The benefit of various platforms is that they offer trading in different assets. You can do stock trading and invest your amount in stocks. Or you can do exchange-traded funds (ETFs). Likewise, you can trade bonds, mutual funds, forex, and cryptocurrencies.
If you want to minimize your losses, you should divide your investment into various parts. The stock market works with the economic stability of the country. So if your country is facing some economic crisis, there is a high possibility that people won’t invest in stocks.
However, cryptocurrencies work completely differently. They are free from world economics and have their performance. Therefore, anyone can invest in crypto from anywhere around the globe. If the currency is going well, you will gain profits. Furthermore, you will have control over how much you want to invest. Though there is a minimum investment amount, you can withdraw your funds by selling the coins any time you want.
Different assets have different profitability ratios and security. Therefore, some platforms offer a minimum loss while others offer unlimited loss and profits. So, if you can gain a huge profit, you might also lose all your investment. However, investment in bonds and mutual funds won’t result in complete loss. Thus, you will be able to get some of your amounts back even if you do not make a profit.
That is why it will be better for you to invest in multiple platforms with multiple assets.
4. Limit the number of platforms
Although using multiple platforms ensures varying profitability ratios and more security, the cost may increase. Every platform will have its maintenance cost that traders and investors will need to pay. So if you use many different platforms, you will need to pay higher fees. Even if you are not making any profits, you will need to pay the maintenance fee because you are using their platform.
So having many accounts means more cost. You will also have a transactional fee and other charges. So all these charges plus the maintenance fee will cost you a heavy sum. Wouldn’t it be better to limit the accounts then? Choose only the platforms and assets that offer tax benefits and less risk. This would be better for you as a beginner.